After careful consideration, the US Congress has expanded on its intention to regulate cryptos and other digital assets. In several large economies, the legal ambiguity surrounding digital assets has become a major source of concern. The recent Terra meltdown, in which $15 billion was lost from the crypto market, has only reinforced the need for regulation.
Specifically, the 118th Congress submitted 50 measures and resolutions addressing governance, blockchain, and CBDCs amid the crypto market’s anxiety. After months of speculation, this decision has been reached. However, this historic decision excludes the draft legislation on stablecoins and the strategy for digital asset regulation.
What is included in the bills?
Blockchain technology has undeniably raised new regulatory worries in recent years. Ransomware and the involvement of cryptocurrency in the recent Russian invasion of Ukraine are two of them. According to reports, Ukraine received millions in cryptocurrency donations during the armed war, while Russia attempted to circumvent economic sanctions by utilizing cryptocurrencies. The recent growth in NFT trading & DeFi solutions has also given government authorities additional options for regulatory action.
According to Forbes, the first category of bills is crypto taxation, which has seen many bills pass. Senators from both parties(Republicans and Democrats) introduced The Virtual Currency Tax Fairness Act of 2022.
Personal transactions involving virtual currency that result in gains of less than $200 would be exempt under the Act. Congressman Tom Emme introduced The Safe Harbor for Taxpayers with Forked Assets Act of 2021. Any sum received in forked convertible virtual currency would be exempt from gross revenue under this Act.
The second group is Central Bank Digital Currencies (CBDC), which includes a large number of bills. A bill was introduced to examine the impact of Bitcoin adoption on El-Salvador(The Accountability for Cryptocurrency in El Salvador Act). The Act would look into El Salvador’s legal adoption of Bitcoin and its ramifications for the United States and the global economic system. Another law, the E-Cash Act, aims to create a digital currency.
Finally, the third category concerns regulatory clarification regarding digital currencies and digital asset instruments. The Blockchain Regulatory Certainty Act, for example, protects “noncontrolling” blockchain solutions and services developers. To address the SEC’s concerns about digital assets & digital asset securities, the Token Taxonomy Act was introduced.
Rising need for regulations of the crypto economy
Recent events like the collapse of supposedly stablecoin UST have raised the need for regulations of the crypto markets. Recently, we reported about one case where Stablegains, a DeFi services provider, allegedly cheated their customers by promising to invest collectively in both USD Coin and TerraUSD. Instead, it invested all the money in UST. After the collapse of the UST market, it changed its wordings in apps and landing pages to depict that it had intended to invest in UST only.
Other governments across the world are now proactively making amendments to their laws to include digital assets in their regulations. Russia has recently shown its interest in adopting cryptos as a legal tender. On Thursday, Russia’s Industry and Trade Minister, Denis Manturov, said that the government and central bank would “sooner or later” recognize cryptocurrencies as a form of payment.
On the other hand, India has made laws that discourage crypto transactions by levying heavy taxes(30 %+) on such transactions.